About Us: CORPORATE STRATEGY
Seabridge Gold was founded in 1999 at the bottom of the gold market. At that time, it took 44 ounces of gold to buy one unit of the DOW Jones Industrial Average, an all time high for the stock market in terms of gold. It was our view that financial assets, especially equities, were in a bubble, that gold would eventually outperform equities and other assets, and that the gold price would eventually exceed its 1980 high of US$852.
Our goal in establishing Seabridge was to provide exceptional returns to shareholders by maximizing leverage to the gold price in what we perceived would be a rising gold price environment. Our strategy was to optimize gold resources while limiting shares outstanding. This approach provided a simple but effective measure for evaluating dollars spent in terms of resources added compared to shares issued.
We decided that our competitive advantage at Seabridge would be to evaluate, acquire, explore and develop gold deposits. From our inception, we determined that Seabridge would not build or operate mines...we would look to partner or sell assets which were ready for production. Building mines adds considerable technical and financial risks and requires a different set of skills and resources. Nor did we wish to undertake grass roots exploration which is very high risk. We therefore narrowed our value-added proposition to three phases which would unfold as the gold price rose...acquiring known deposits, expanding them and defining their economic parameters. In our view, this was a relatively lower risk and less capital-intensive strategy consistent with the goal of optimizing gold ownership while limiting share dilution.
In effect, Seabridge was conceived as a gold-in-the-ground ETF with the value-enhancing potential to expand gold ownership and upgrade the quality of gold resources without equivalent equity dilution, unlike above-ground gold ETFs.
In 1999, it was cheaper to buy ounces in the ground than to explore for them. We therefore set out to buy gold deposits in North America that were not economic in a low gold price environment. Hundreds of projects were for sale at distressed prices as producers struggled to stay in business. Seabridge chose projects with three main characteristics:
- Proven resources with quality work done by reputable companies;
- Upside exploration potential; and
- Low holding costs to conserve cash in the event that a higher gold price was delayed.
From 1999 to 2002, Seabridge acquired nine different North American gold deposits at less than US$1.00 per ounce of resource and holding costs of less than 10 cents per ounce per year.
By 2002, with the gold price on the rise, it was becoming more expensive to acquire existing resources and the cost-benefit equation tilted in favour of exploration. Seabridge's strategy entered its second phase which was to expand its resource base by carefully targeted exploration. This phase proved highly successful...total measured and indicated gold resources grew 381% over five years while shares outstanding increased only 35.4% during the same period.
By 2008, it was clear that the gold price had risen sufficiently to make a number of Seabridge's projects potentially economic. Work therefore began work on the third phase of Seabridge's strategy...defining the economics of its projects through engineering studies and upgrading resources to reserves. This effort focused first on the giant KSM project which, during the exploration phase, had emerged as the Company's most important asset. A Preliminary Feasibility Study (PFS) was completed for the KSM project in March 2010 and a substantial portion of its resources were converted to reserves. Subsequently updated, the PFS has increased reserves and throughput capacity, improving the project`s economics. A similar program is in process for Courageous Lake, Seabridge's second largest asset. Work on KSM and Courageous Lake has been funded in part by the sale of non-core assets which is consistent with the strategy of limiting share dilution and enhancing shareholder value. Both core assets are being readied for joint venture to large producers when market conditions are favourable.